Question 1

Carolyn, a cashier at Tops Supermarkets, may cash checks for up to $20 over a purchase amount. A friend needs money for a dress so Carolyn cashes a check for $50 with no purchase. The check bounces. Carolyn is:
A) liable because she violated her duty of obedience.
B) liable because she breached her duty to inform.
C) not liable since she has apparent authority to take the check.
D) not liable unless she knew her friend did not have the money in the bank.

Accepted Answer

Carolyn is liable because she violated her duty of obedience by cashing a check for $50 with no purchase, which goes beyond the policy of cashing checks for up to $20 over a purchase amount.

Question 2

An agent has breached his fiduciary duty in which of the following situations?
A) All of the following choices are correct answers.
B) Where the agent makes a secret profit.
C) Where the agent uses information obtained in the course of the agency for his own benefit.
D) Where the agent competes with the principal.

Accepted Answer

All the options (B, C, and D) describe situations where an agent has breached their fiduciary duty. Making a secret profit, using information obtained during the agency for personal benefit, and competing with the principal are all breaches of the duty of loyalty that an agent owes to their principal.

Question 3

The concept of conflict of interest as it relates to the law of agency includes which of the following?
A) An agent may take a position that conflicts with the principal only if the principal, with full knowledge of all the facts, consents.
B) An agent may not represent her principal in a transaction in which the agent has a personal interest.
C) An agent may not act on behalf of adverse parties to a transaction without both principals' approval of the dual agency.
D) All of these represent conflicts of interest.

Accepted Answer

Each choice (A, B, and C) describes a situation that could lead to a conflict of interest in the law of agency. Agents must act in the best interest of their principals, and these scenarios require transparency, consent, or avoidance to maintain that fiduciary duty.

Question 4

Steven is a manufacturer's representative for Incell Corporation. One day he receives a big-screen television as a gift from one of the clients he contacts on behalf of Incell.
A) Steven must account to Incell for the gift he has received.
B) The big-screen television belongs to Incell rather than to Steven.
C) If he keeps the TV without telling Incell, he will have breached his fiduciary duty.
D) All of these are correct.

Accepted Answer

All options are correct because they reflect the principles of fiduciary duty and the obligations of an agent to their principal. As a representative of Incell Corporation, Steven has a duty to act in the best interests of Incell, which includes reporting gifts received in the course of his duties, as these could be seen as attempts to influence his actions on behalf of the company.

Question 5

What is an independent contractor? Can an independent contractor also be an agent? Explain.

Accepted Answer

The answer of What is an independent contractor? Can an...

Question 6

Mark hires Joe's real estate agency to sell his property, telling Joe he has lost too much money playing the stock market to afford to keep it up. Then Mark wins the three million-dollar lottery! Joe reads this in the newspaper and that afternoon makes a contract with Sharon to sell the property. Is the contract valid?
A) No, the agency terminated because of the change in conditions.
B) No, the agent has no right to sell without consent.
C) Yes, Mark would have to notify Joe if he wanted to stop the sale.
D) Yes, Joe had apparent authority to sell.

Accepted Answer

The answer of Mark hires Joe's real estate agency to...

Question 7

A durable power of attorney differs from a power of attorney in that the durable power of attorney:
A) is a formal written instrument, whereas the power of attorney may be informal and oral.
B) must follow a standardized form set forth in the federal Uniform Durable Power of Attorney Act.
C) becomes effective upon the principal's subsequent incapacity or the agent's authority is not affected by the principal's subsequent incapacity.
D) is governed by Article 3 of the UCC.

Accepted Answer

A durable power of attorney remains effective or becomes effective upon the principal's incapacity, unlike a standard power of attorney which typically ceases to be effective if the principal becomes incapacitated.

Question 8

An agent's duty to inform:
A) applies to material and nonmaterial facts relating to the agency.
B) does not apply if providing facts to the principal would violate a superior duty owed by the agent to another person.
C) arises because notice to an agent does not constitute notice to the principal.
D) All of these.

Accepted Answer

An agent's duty to inform does not apply if providing facts to the principal would violate a superior duty owed by the agent to another person, as the agent must balance duties and prioritize legal and ethical obligations.

Question 9

Prentice and Mercedes are partners in a catering business. The law of agency:
A) has no significance for their business.
B) is important to their business because both Prentice and Mercedes are agents of the partnership and as such have the authority to represent and bind the business in all usual transactions of that partnership.
C) will only affect their business if they hire employees.
D) will only affect their business if they hire independent contractors.

Accepted Answer

The law of agency is crucial in a partnership because each partner acts as an agent of the partnership, having the authority to bind the business in transactions related to the partnership's usual operations.

Question 10

Which of the following is correct with regard to the capacity of an agent?
A) The incapacity of the agent disqualifies him from making a contract that is binding on his principal.
B) No mental capacity is necessary for an agent.
C) If an incompetent person who is not under guardianship appoints an agent, contracts made by that agent are voidable.
D) A young child or a person under guardianship has the capacity to act as an agent.

Accepted Answer

If an incompetent person who is not under guardianship appoints an agent, the contracts made by that agent are voidable because the principal's capacity affects the validity of the contract.

Question 11

An agent may lose the right to compensation:
A) by breaching the agency contract willfully and deliberately.
B) if the specified result of the contract is not obtained.
C) if the duty of loyalty is breached.
D) In all of these situations.

Accepted Answer

An agent can lose the right to compensation if they breach the agency contract willfully and deliberately, fail to achieve the specified result of the contract, or breach the duty of loyalty. All these situations violate the terms or the spirit of the agency agreement, justifying the loss of compensation rights.

Question 12

Discuss the nature of agency, including the scope of agency purposes.

Accepted Answer

The answer of Discuss the nature of agency, including the...

Question 13

Which of the following will terminate an agency coupled with an interest?
A) The death of the principal.
B) The bankruptcy of the principal.
C) The incapacity of the principal.
D) None of these will terminate such an agency.

Accepted Answer

An agency coupled with an interest is a special type of agency relationship where the agent has an interest in the property of the principal that is the subject of the agency. This interest is typically security for a debt or obligation owed by the principal to the agent. Because the agent's interest is in the property itself, the agency relationship does not terminate upon the death, bankruptcy, or incapacity of the principal. This makes it distinct from other types of agency relationships, which may terminate under such conditions.

Question 14

Bob owns a business delivering coffee and donuts within the downtown area of the city. Smith Co. calls him to deliver a large quantity of his products to their local office. While taking a coffee urn through the Smith Co.'s office, Bob drops it on Lester, scalding him. Who is liable?
A) Smith Co. and Bob are liable.
B) Bob alone is liable.
C) Lester has to absorb the cost himself since he assumed the risk by working at Smith Co.
D) Only Smith Co. is liable.

Accepted Answer

Bob is directly responsible for the injury caused to Lester because the injury resulted from Bob's actions (dropping the coffee urn). There's no indication that Smith Co. had any control over Bob's actions or contributed to the accident, making Bob alone liable.

Question 15

a.Explain how an agency relationship comes to an end. 
b. Is an agency relationship ever irrevocable? Explain.

Accepted Answer

The answer of a.Explain how an agency relationship comes to...

Question 16

All of the following except which one is a duty of an agent?
A) Account for money received on behalf of his principal.
B) Inform his principal of any information relevant to his agency.
C) Refrain from competing with his principal.
D) After the agency is terminated, refrain from using any information gained while an agent.

Accepted Answer

Duty D, refraining from using any information gained while an agent after the agency is terminated, is not a general duty of an agent. The primary duties of an agent include accounting for money received on behalf of the principal, informing the principal of relevant information, and refraining from competing with the principal. However, the obligation regarding the use of information after termination of the agency can vary based on the terms of the agreement and specific laws, but it is not considered a general duty like the others listed.

Question 17

Mark (age 16) appoints Joe (age 21) as his agent to purchase a digital camcorder from Electronic World. The transaction is:
A) void because Mark is a minor.
B) voidable by Electronic World because Mark is a minor.
C) voidable by Mark because he is a minor.
D) not voidable because Joe is not a minor.

Accepted Answer

Mark, being a minor, has the capacity to void the contract, making the transaction voidable at his discretion.

Question 18

A __________ is a written, formal appointment of an agent.
A) fiduciary
B) revocation
C) power of attorney
D) rescission

Accepted Answer

A power of attorney is a legal document that grants one person (the agent) the authority to act on behalf of another person (the principal) in legal matters and decisions.

Question 19

Lewis employs Donna under a one-year contract to sell Lewis's line of leather wallets and checkbook covers. If without Donna's knowledge, Lewis dies:
A) under the Second Restatement, Donna's actual authority will not terminate until the end of the one-year contractual term.
B) under the Second Restatement, Donna's actual authority will not terminate until she has notice of Lewis's death.
C) under the Third Restatement, Donna's actual authority will not terminate until she receives notice of Lewis's death.
D) under both the Second and Third Restatements, Donna's actual authority will terminate at either the end of her one-year contractual term or when she receives notice of Lewis's death, whichever occurs first.

Accepted Answer

Under the Third Restatement, an agent's actual authority terminates upon the principal's death, unless the agent has notice of the death.

Question 20

A gratuitous agent:
A) is a paid agent.
B) is subject to the same duty of loyalty as other agents.
C) has no duty of diligence.
D) need not be reimbursed for her expenses.

Accepted Answer

A gratuitous agent, although not paid, is still subject to the same duty of loyalty as other agents, meaning they must act in the best interest of the principal.

Quiz 28: Relationship of Principal and Agent

Carolyn, a cashier at Tops Supermarkets, may cash checks for up to $20 over a purchase amount. A friend needs money for a dress so Carolyn cashes a check for $50 with no purchase. The check bounces. Carolyn is:

An agent has breached his fiduciary duty in which of the following situations?

The concept of conflict of interest as it relates to the law of agency includes which of the following?

Steven is a manufacturer's representative for Incell Corporation. One day he receives a big-screen television as a gift from one of the clients he contacts on behalf of Incell.

What is an independent contractor? Can an independent contractor also be an agent? Explain.

A durable power of attorney differs from a power of attorney in that the durable power of attorney:

An agent's duty to inform:

Prentice and Mercedes are partners in a catering business. The law of agency:

Which of the following is correct with regard to the capacity of an agent?

An agent may lose the right to compensation:

Discuss the nature of agency, including the scope of agency purposes.

Which of the following will terminate an agency coupled with an interest?

Bob owns a business delivering coffee and donuts within the downtown area of the city. Smith Co. calls him to deliver a large quantity of his products to their local office. While taking a coffee urn through the Smith Co.'s office, Bob drops it on Lester, scalding him. Who is liable?

a.Explain how an agency relationship comes to an end. b. Is an agency relationship ever irrevocable? Explain.

All of the following except which one is a duty of an agent?

Mark (age 16) appoints Joe (age 21) as his agent to purchase a digital camcorder from Electronic World. The transaction is:

A __________ is a written, formal appointment of an agent.

Lewis employs Donna under a one-year contract to sell Lewis's line of leather wallets and checkbook covers. If without Donna's knowledge, Lewis dies:

A gratuitous agent: